credit Archives - Page 2 of 9

When Should You Hire A Financial Expert?

Navigating the worlds of personal finance, taxes, loans, and investments can be harrowing- especially if you are just starting out and have no previous experience. But, how do you know when to DIY it (thank you, Google! ), and when to actually shell out the cash for a financial adviser or other expert? Well, this guide by Dailyworth at Popsugar Finance is a great place to start:

-Credit Repair- DIY. Many “credit repair” businesses are scams. You can repair your credit by maintaining several lines of credit, paying bills on time, and reducing debt.

-Investments- DIY. Choose low cost index funds that mimic the market. Many places provide free asset allocation worksheets.

-Taxes- hire a pro. Tax law is complicated and changes constantly: it’s the pro’s job to stay on top of it. A good tax person can also show you the best ways to minimize your bill.

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Why Is Bad Credit So Bad?

by Kathy T.

There are so many personal finance articles out there about how to improve your credit, but why does it actually matter? I’m a firm believer in the fact that a number can never define your worth- your weight on a scale, the amount of money your make, your GPA from school- none of that reflects your character. A credit score attempts to measure how risky of an investment you are to potential lenders. It takes into account whether or not you pay your bills on time, and how much debt you currently possess. Again, having bad credit does not mean you are a bad person, but it can have severe effects on your personal life. This article by Brian Martucci at Money Crashers illustrates what a bad score can mean for you:

-Getting approved for any sort of loan can be difficult, including ones for cars and homes

-You will face higher rates and more restrictive terms on loans you do get

-You may face trouble renting an apartment

-Potential strain on personal relationships

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How Much Does A Late Mortgage Payment Lower Your Credit Score?

by Kathy T.

Everyone knows that not paying your bills on time will negatively affect your credit score. But did you know that some bills are more heavily weighted than others? It shouldn’t come as a surprise, but paying a $60 water bill late is going to affect your score much differently than paying a $1,000 mortgage payment late. Check out this article by Vanessa Midun at Adweek for more info:

The damage caused by being 30 days late on a mortgage payment was pretty severe, especially for the individual with the highest credit score. From 780, the score dropped to a possible 670 – that’s over 100 points.

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How Do Lenders Look At Your Credit?

by Kathy T.

One of the first, and most important things you need to do before applying for a mortgage is getting your credit score in order. If you have bad credit, you most likely will not get approved. But, once you apply, what happens then? What exactly do they look at, and how do they decide whether you’re approved or not? It’s not as simple as having a score above a certain number. Check out this post by Diane Beaumont at Active Rain for more info:

-Your scores will have a direct impact on the interest rate that you qualify for or if you qualify for a loan at all.

-Your debt balances will be reviewed to determine your debt-to-income ratio. Essentially, the lender will determine if you are able to make your payments on time as scheduled or if your debt balances appear to be burdensome.

-Your mortgage lender will also review the number of late payments on your credit report as well as the dates for those late payments.

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Do You Believe These Credit Score Myths?

by Kathy T.

Most people have heard the standard tips to improve your credit score: pay your bills on time, maintain a low credit balance, and reduce. But, do all of these really work? You don’t know what really affects your score, unless you check your credit report. Check out this post by Kristina at Cents and Order for some surprising facts that may change how you look at your credit score. Some of them even surprised me! Here are the biggest myths about credit that most people (including myself) believe:

– “Paying household/utility bills on time gives you good credit.” False. But, if you pay them late, it WILL negatively affect your score.

– “Your credit score is the same across the board.” False. Your score will most likely be different from each agency.

– “Paying bills a few days late will hurt you.” False. Late payments will not show up on your score until they are 30+ days late.

Wow! I totally believed the last one. That’s really a relief, even though I always pay my bills on time 😉 it’s nice to know that there is a bit of wiggle room, though.

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Easy Ways To Bump Up Your Credit

by Kathy T.

My credit score is okay. I don’t really have any complaints, because I think it falls into the “average” category. I pay all my bills on time, but I do have quite a bit of student loan debt. Anyway, one of my goals this year was to get my score above a certain number (okay, the goal is 700), so I’m always looking for tips on ways to push it up even a point or two. Having good credit is crucial when applying for a mortgage, or any other loan. Here are some tips by Cathy at Fabulessly Frugal:

-Raise awareness- use a free credit score checker online (like Credit Karma or Credit Sesame) every few months. Knowing what you have to work with is the first step, and will help you see changes.

-Keep a low, but active credit card balance. Have a low limit (below $1,000— the lower, the better), and spend about $50-$100 a month on it. Pay it off on time, of course.

-Pull your free credit report once a year from Experian, Equifax, and TransUnion. Seeing what has affected your score will help you make positive changes in the future!

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What Your Credit Card WON’T Get You

by Kathy T.

Credit cards are both a blessing and a curse. When used sparingly and responsibly, they can help out a lot. You can buy things you wouldn’t normally be able to afford and make payments on them. You can also improve your credit by being in good standing with credit card companies. In a pinch, they can also save you if your bank account is not up for paying bills. You can pay your mortgage, you can buy a car, and you can even pay for an expensive trip with a card (again, the key word is RESPONSIBLY). However, there are some mischievous things that credit cards will not buy you. Check out this post by Janna Heron at Bankrate. Most of them are not that surprising:

-Marijuana- even if you have a legal prescription or live in a state where recreational use has been legalized.

-Gambling chips- better use cash only if you plan on heading to Vegas.

-Lottery tickets or scratch cards- are considered “high risk business activities”.

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How Credit Cards Can Hurt Your Home Loan

by Kathy T.

Your credit score is one of the main items that lenders look at when determining if you qualify for a mortgage. Credit card use will affect your score, and lenders will also look at how you handle them. Misusing a credit card can damage your chances of getting approved, or even result in a rejection. For credit card mistakes that can cost you, read this article by Lindsay Konsko at US Money News:

-Paying late- this is probably the worst mistake you can make

-Over-utilizing credit

-Applying for too many cards at once

-Never getting a card at all- having a card and using it responsibly shows that you pay your debts.

-Racking up debt

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Checking Your Credit Score For Free

by Kathy T.

You see them all the time- ads everywhere telling you where to go to check your credit for “free”. Of course, you have to enter a credit card number, then you are charged later. To avoid this, and to also keep an eye on your score, you need to find out where to actually check your score for free. Read this post by Gretchen at Retired By 40 for more:

Credit Sesame

Credit Karma(I have personally used this one before twice- it’s absolutely free)

Wise Piggy

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The Secret To A Scary Good Credit Score

by Kathy T.

If you’re trying to buy a house, an extremely important part is having a good credit score. If you don’t pay your bills on time, are up to your ears in debt, and don’t follow through on your financial commitments, no lender is going to want to back you. However, even if you do have bad credit, not all is lost. There are plenty of programs out there designed to help out buyers with financial woes, as well as government housing options. Of course, getting your credit score fixed is way more preferable. For tips on how to get a great credit score, read this post by Anita at Live Like You Are Rich:

-Bad/negative reports on your score are typically there for 7 years (bankruptcies can be on there for 10 years).
-You can improve your credit score by keeping accounts and credit cards open and paid off for a long time. The longer you have a good standing account the better
-Applying for lots of credit (credit cards, different types of loans, etc.) within a few months of time can drop your score.
-Lower debt

-Pay all bills on time

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